"Support your local merchant" is an increasingly common refrain, especially in these tough economic times.
In Santa Rosa, the Shop Local campaign seeks to keep sales tax dollars in town while boosting the bottom line for the city's retailers. Political advocacy on behalf of locally owned business by the recently formed Go Local Coalition has added a new dimension.
Here's an easy way for consumers to help out: When making purchases of more than about $15 with a debit card, use your four-digit PIN code instead of signing for them like credit card transactions.
For you, the result is the same: The money is deducted from your checking account. But, whether it's a local restaurant or a national hardware chain, merchants generally pay substantially higher fees for a signature transaction using a debit card than they pay for a PIN transaction with the same card.
Much like the overdraft fees that surprised and angered so many consumers, signature debit fees have become a profit center for banks that issue the cards and VISA and MasterCard, which operate the major payment networks. Ultimately, the fees get passed on to consumers in the form of higher prices.
A joint investigation by the New York Times and the PBS series "Frontline" found that large retailers pay 75 cents in fees on every $100 consumers spend in signature debit transactions, about four times what they pay for a similar PIN transaction that is less vulnerable to fraud.
Some merchants already steer customers to use PIN codes, but signature transactions still account for 61 percent of all debit purchases. VISA made those purchases easier by waiving signature requirements for many transactions of less than $25. Some cards offer incentives, such as mileage points and prizes that aren't available for PIN transactions.
By 2012, debit transactions are expected to overtake cash purchases. Although the typical fee may be pennies, with billions of transactions annually, those pennies become big dollars.
Many debit card users learned the hard way about stiff fees for overdrawing their accounts, which resulted in new consumer protection rules that take effect this year. Now, consumers can give merchants a break by learning — and using — their PIN codes for debit card transactions.